The Coming Video War Between Apple and Google

This follows my recent post about how a new TV interface from Apple could decimate the television landscape.

Even though Steve Jobs never talked about changing the face of search with Siri, its natural language interface.

But doing so would certainly be a riveting Hollywood screenplay in which Jobs, the uber-innovative, uber-inventive CEO, ultimately gets revenge on a corporate rival he views as a “copy cat.”

In this fictional script, that rival would be Eric Schmidt, one of the top executives at search giant Google. It’s Google, after all, that’s breathing down Apple’s neck with its rapidly expanding Android phone platform – a platform that, according to Jobs and his lawyers, mimics Apple’s breakthrough iPhone technology.

Putting this Oscar dream aside, there’s intensifying competition heating up between Apple and Google, even though Jobs is –sadly – no longer on the scene.

Indeed, even though Google has had voice-enabled search for some time on iOS and Android devices, Schmidt has said it’s possible that Siri could be a real and radical game-changer.

Schmidt may be right.  And if he is, then Google will be facing a serious threat as Apple reinvents Google’s home turf of search.

With a “personality” that displays a unique understanding of humanity, Siri’s digital chromosomes enrich the user’s experience. This sets it apart from Google’s more mechanical offerings, and shows why Apple’s consumer-obsessed culture is so different from Google’s corporate DNA, which is as robotic and algorithmic as the “Android” name suggests.

There is rich irony here, as Apple disintermediates the greatest disintermediator of all time.  When Google’s superior search service started, it practically single-handedly reduced the brand-driven experience that consumers had thereto relied on with directories and a fully editorialized Web.  Google replaced those channels and home pages with 10 blue links.  And in the process, became users’ destination of first resort 13 times per day.

And Apple has always been a curator extraordinaire – developing collections and exercising famous (and occasionally notorious) judgment to determine who deserves to be in its directories of songs and apps.

But now, Siri stands ready to flatten the world of entertainment.

In all fairness, Page and his team are now trying hard to enrich the user experience by aligning their YouTube brand with media companies like Disney, and doling out big dollars for proprietary programming. The hope here is that YouTube can create dozens of lucrative user-friendly / user-favorite Web channels featuring comedians, sports stars, musicians and other entertainers.  The company is building stocks of its ‘own’ media weapons in preparation for the coming war.

But, as always, it will be hard for Google to win the hearts of consumers when it comes to content; and it will be especially daunting because Apple is already so completely connected to users.

Meanwhile, with its enviable consumer connection, Apple will undoubtedly extract a toll from media companies, who still want to bathe in the warm digital light that emanates from the inviting and engaging brand Jobs built.  And, as it has in every other media category, Apple stands to capture an outsize share of profits for delivering content into a magical consumer experience.

Jealous much, Google?

With Siri TV, Apple Will Dismantle the TV Networks

This article was published as a guest post at All Things D, and is republished here for DigitalQuarters readers.

Steve Jobs died without fully transforming television, but the day after he passed away, Apple unveiled Siri, its natural language interface. Though it’s currently only embedded in the new iPhone 4S, Siri could eventually change the face of the TV industry.

Notice I said “TV industry.”

But from my perspective, Siri’s greatest impact won’t ultimately be on users, or on device manufacturers (though they certainly risk losing market share to Apple). It will be on the TV industry’s content creators and packagers. Why? Because a voice-controlled television interface will fundamentally disrupt the six-decade-old legacy structure of networks, channels and programs. And that’s a legacy that — until now, at least — has been carried forward from analog to digital.Most observers and analysts believe that Siri’s voice commands could eliminate the need for those clunky TV remote controls. With the blurring and exponential proliferation of television and Web content, telling your TV what you’d like to watch, instead of scrolling through a nearly infinite number of program possibilities, makes a lot more sense.

There’s an important underlying precedent here.

If the Internet can be generalized to have one effect across every industry that moves online, that effect would be disaggregation. Choices go from finite to infinite. Navigation goes from sequential to random access. And audiences choose content by the item far more than by the collection. We’ve gone from the packaged and channelized to the unbound and itemized. Autonomous albums are fragmented into songs; series into clips; and magazines and newspapers into articles and individual photos.

As much as we may think that has already happened with video, it is nothing compared to the great leveling that will occur in the voice-controlled living room. Voice-controlled TV means direct navigation to individual episodes, programs and clips. And it will almost certainly lead to a discernible deconstruction of the network and channel structure — not to mention the decomposition of even the aggregated marketplaces like Netflix, Hulu and YouTube.

Here’s the simple reason: No one is going to sit on their couch and say, “Siri, show me NBC’s ‘Community.’” In a voice-activated world, monikers like “NBC” become useless. They don’t stand for anything meaningful to the consumer. They’re just remnants of a decrepit channel structure that’s unraveling. And, in the end, they’ll simply connote the fast-fading allure of mid-20th century mass appeal.

To be sure, the TV majors will lose much of their ability to realize network effects. Already, you’re hearing less about “lead in” and “lead out.” What you are hearing more about, however, is disconnected videos. A program on YouTube, for instance, will sit on a level voice-controlled playing field with an NBC show, and that field will soon become even more level, because Siri will eliminate the menus that structure the artificial hierarchies of content collections.

So how will we be able to get network effects back in video? Let’s look at four possible ways:

  • Branded Content — Players can build a strong brand that stands for something with their audiences. Break.com, Discovery and Oprah are all meaningful and build long-term customer loyalty. (“Siri, show me new TED Talks.”)
  • Curation — Brand the collection with a curation strategy so that the curator’s name and stamp of approval means something to the audience. (“Siri, show me Jason Hirschhorn’s latest movie suggestions.”)
  • Social — In the fully social world that we expect to see, focusing on the virality of content means you tap the human distribution network and social operating system. (“Siri, show me what videos my friends are watching.”)
  • Personal — We’ve already seen the extraordinary value of well-tuned personalized recommendations, with Netflix’s notable prize and other famed stories of the benefits of great recommendations. Increasingly, our own patterns of individual videos and the brands we affiliate with, along with recommendations from friends, will be combined into personalized recommendations we won’t even have to ask for. I have no doubt that Siri will be as good a “Genius” as iTunes is at recommending what else to watch. Ultimately, in the age of data, whoever knows the most about us will be able to give us the best experience.

Beyond disaggregation, personalization is ultimately the most powerful consumer value of digital media. My mother’s TV experience was to walk over to her TV set and turn a dial to select among three channels to satisfy her individuality. But in the next generation, no two people will receive the same recommendations from the millions of content choices available.

Before he died, Jobs now famously told Walter Isaacson, his biographer, that he had finally cracked the TV code. It’s unclear what Jobs meant, what this entailed or what he thought it would lead to in the years to come. So, barring further posthumous disclosure, Jobs’s own predictions of his ripple effects will be a media mystery for now.

One thing that’s clear, though, is that Jobs’s Siri will start the dismantling — or creative destruction — of the TV industry as we’ve known it for the last 60 years.

Netflix – It’s Wall Street’s Error, Not Reed’s

Change is hard. Change is scary. Change is costly. Change is essential.

This is no more true anywhere than in today’s unbelievably dynamic digital media business.

In February of this year, I outlined the characteristics that define great leadership in this tumultuous digital media industry – and will determine who ultimately succeeds.  I published it in my Media Success newsletter that month (reprinted below), and it has remained a sidebar feature ever since, as the definition of a perfect game.

The 7 Variables For Media Success

  1. Focused strategy and leadership
  2. Meaningful destination brands
  3. Content and experiences craved by audiences
  4. Scalable channels to acquire new audiences
  5. Reach the audience when, where, and how they want
  6. Robust revenue streams (advertising and other)
  7. Profitable business model that scales

Those with these seven attributes will win in media.

 

And that’s why I hereby nominate Netflix CEO Reed Hastings for real-time membership in the Digital Hall of Fame. 

His extremely controversial and determined decision this week to split his company in two is both phenomenally ballsy and smart.

Hastings sees where the world is going, and, instead of resisting, he is getting out in front. He knows that his DVD service today is immensely profitable, and yet it is on a long slow ramp toward zero.  And, at the same time, Internet-delivered video is a whole new, and far more valuable, business.

Sound familiar?

It’s the same dynamic throughout most large old media businesses.  And yet – unlike many in old media – Reed is doing something aggressive about it.

Rather than playing to short-term profits on the DVD business, he is turning full-tilt to the business with the greatest strategic value. If I’m not convincing on this point, please read Mark Suster’s trenchant analysis.

Yes, Hastings communicated his new strategy poorly. But he admits as much in his widely distributed apology. So, with this mea culpa now delivered and digested, let’s get off Hastings’ back, and get back to the most interesting dynamics at play here:

Far beyond any villainy on Hastings’ part, and far beyond any damage to his customer base for changing his product line, I suggest looking for someone else to blame by pointing the finger at Wall Street.

Verrrrrrrrry hypocritical.

The Street talks about its desire to see long-term strategic vision; but whenever it’s there, right in plain sight, investors collectively blink – and then sell, sell, sell. Indeed, the current sell-off of Netlfix’s stock is one of the most alarming signs of the Street’s misunderstanding of media’s strategic future. And now, looking forward, I pity any CEO who turns to Wall Street for strategic validation.

Let’s keep the spotlight on Netflix, though.

I wholeheartedly agree with Hastings.

And there’s no question – in my view, at least – that broadband-delivered content represents the much more important and valuable business opportunity for his company. The fact that he decided to split the service lines at Netflix simply confirms openly what was already inevitable, if previously hushed.

For some reason, Wall Street just doesn’t get it.  And, in my opinion, its punishing resistance to Hastings’ moves is akin to pummeling AOL for thinking beyond dial-up service; yet, as we all know, that company is a decade overdue in figuring out its next wave.

I’m a believer in facing facts, truth-telling, marketplace opportunity, and getting to the sweet spot first.

So, having said that, I’m putting my money on it. Yesterday, I bought Netflix shares. It’s the first single stock purchase I’ve made in media in a couple of years; and I made the buy after seeing a CEO – who has all the variables dialed in to achieve on the next big opportunity in media – do the absolute right thing.

Viacom Takes Its Toys and Goes Home

Tug of WarViacom this week told Hulu that it is pulling its content out of the video site because they couldn’t reach economic terms that value The Daily Show and Steven Colbert to Viacom’s satisfaction.  Brian Stelter reported the story for the New York Times this week, quoting me with reference to the ‘game of chicken’ that Viacom has been playing with Hulu.  This game plays to chairman Sumner Redstone’s strengths, as he’s already presided over the protracted “off-again, off-again” conversations by which Viacom’s sister-company CBS has held out from Hulu.

But these negotiations over how to divide the pie miss the opportunity altogether.  Against all odds, Hulu has surprisingly created  a successful consumer destination.  With a great consumer experience, Hulu has become *the* destination for “official” TV video.  While media executives fret the impending decline of television, the future has already begun to gel at the site with an audience of 30 million,  advertiser demand, and premium monetization.

The shame is that Hulu CEO Jason Kilar and his team have their efforts drained by brinkmanship negotiations with the industry.  What a waste of time!   Instead, what would benefit all parties — Hulu, its equity partners, and  the industry at large —  is for Hulu to spend time on improving the consumer experience, enticing audiences, and monetizing.  Further, Hulu may be in the best position of any media venture to command premium and subscription pricing from consumers — so additional content and scale could help make digital video more profitable. Unlike the drain of the power games that Viacom is playing, these constructive investments would have the prospect of lifting the fortunes of the media industry for everyone’s benefit.

While Hulu offers hope for the industry, Viacom crushes it.